Vietn

WIN-WIN CLEANING, INC.

Submitted to: The Yale School of Management The Goldman Sachs Foundation

Partnership on Nonprofit Ventures

April 3, 2003

ICA Group

617-232-8765 ATTN: Andrew Weaver x117

amese-American Initiative for Development (Viet-AID)

617-822-3717 ATTN: Long Nguyen x15

Table of Contents Executive Summary .................................................................................................... 2 Business Description ................................................................................................... 4 Industry Analysis.......................................................................................................... 5

National Industry Trends....................................................................................... 6 Local Industry Trends............................................................................................. 7 Demand Model........................................................................................................... 7

Market Analysis ............................................................................................................. 9 Market Survey ........................................................................................................... 9 Marketing Focus - Neighborhood Penetration............................................. 11 Marketing Focus - Government Contracts.................................................... 12 Competition .............................................................................................................. 13 Competitive Assessment ..................................................................................... 15

Marketing Plan............................................................................................................. 16 Marketing Strategies............................................................................................. 17 Required Market Capture .................................................................................... 19 Marketing & Business Milestones ..................................................................... 20

Management and Operations ................................................................................ 20 Organizational Structure ..................................................................................... 20 Viet-AID Commitment .......................................................................................... 21 Operations Overview............................................................................................. 22 Becoming a Win-Win Member/Participant .................................................... 23 Distribution of Contracts ..................................................................................... 23 Quality Control ........................................................................................................ 24 Billing & Payments ................................................................................................. 25 Manager’s Role ........................................................................................................ 25

Financial Plan ............................................................................................................... 27 Financial Summary ................................................................................................ 28 Startup Capitalization ........................................................................................... 28 Breakeven Analysis/Capital Requirements................................................... 29 Capital Expenditures ............................................................................................. 29 Assumptions ............................................................................................................. 30

Risk Assessment and Mitigation ........................................................................... 31 Conclusion ..................................................................................................................... 33 Appendix A: Member/Participant Agreement & Policies Appendix B: Potential Customer List Appendix C: Government Contract Information Appendix D: Competitor Profiles Appendix E: Manager Resume Appendix F: Financial Projections: Single Enterprise (5 years) Appendix G: Financial Projections: Win-Win Cleaning (5 years)) Appendix H: Post-Launch Results

Executive Summary The Vietnamese-American Initiative for Development (Viet-AID) developed the business model and structure for Win-Win Cleaning in response to community demand for assistance in establishing small, family-owned businesses. Win-Win functions as a business cooperative, providing office-cleaning services to commercial customers in the greater Boston area. Small cleaning companies, individually owned by members of the Vietnamese community in Boston, are at the heart of the new venture and service the contracts secured for them by the cooperative. Pre-launch market research indicated that: • The commercial cleaning market in Boston will expand over the next few

years and will support a number of startup firms over the next five years. In addition, the market for existing cleaning contracts is highly fragmented with no major players dominating, thus creating opportunities for new firms to enter.

• Boston-area customers would be willing to consider using a Viet-AID-sponsored cleaning company. In a survey of 41 prospective clients, 79% indicated they would consider using the proposed company.

• Surveys of prospective participants in the Vietnamese community revealed that over 25% were interested in starting their own cleaning company and were enthusiastic about the concept of a business cooperative. In follow-up interviews and focus groups, over half of these individuals indicated that they already have commercial cleaning experience.

• Market surveys turned up several promising customer leads right in the Roxbury/Dorchester area, in both the non-profit and for-profit sectors. Win-Win will initially focus on securing a base of contracts from these local customers, and then expand our marketing focus into neighboring communities throughout Greater Boston.

The following marketing niches are particularly promising target audiences for Win-Win: nonprofit institutional customers, corporate customers responsive to social marketing (these two groups include neighborhood customers – see discussion p. 11), and government contracts. These targets alone account for a conservatively estimated $18 million of the $262MM in Suffolk County (MA) contract revenues. Win-Win started operations in July 2002; results to date confirm expectations regarding viability (See Appendix G for summary).

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Ultimately, after certain business milestones have been met, control of the Win-Win cooperative will transition from Viet-AID and its partners to the cooperative members. In the meantime, Viet-AID and Win-Win management have created an entrepreneur council as a vehicle to seek input from the entrepreneurs in the governance of Win-Win. The council is also serving as a first step toward promoting increasing member involvement in the governance of Win-Win. Viet-AID and its partners will maintain representation on the board to ensure that the venture continues to fulfill its social mission. Viet-AID’s long-term vision for Win-Win is that it will serve as a model for similar ventures in other business sectors (for example, security services, landscaping, etc.) in Boston and in other cities. The Win-Win concept should not be confined to the Vietnamese community – the model could also benefit other immigrant and/or low income communities where entrepreneurial drive is thwarted by a lack of English language or core business skills.

David Tran and wife

David was Win-Win’s first member, joining in July 2002. David had prior experience as an entrepreneur, but was working third shift at a light industrial plant when he learned about the venture. David’s hard work has paid off. Since starting on a single contract, David and his wife are now providing cleaning services at five sites and grossing over $60,000 a year! David has also shown impressive commitment to the Win-Win concept, using free time to meet with prospective participants and passing along leads for new jobs to Win-Win’s manager.

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Business Description The Vietnamese-American Initiative for Development (Viet-AID) developed the business model and structure for Win-Win Cleaning in response to community demand for assistance in establishing small, family-owned businesses. The venture provides office-cleaning services to commercial customers in the greater Boston area. Small cleaning companies, individually owned by members of the Vietnamese community in Boston, will be at the heart of the new venture and service the contracts secured for them by the cooperative. Win-Win provides participating business owners (“member/ participants”) with sales and marketing support, as well as administrative services (billing, collections, group purchasing, etc.) and business consulting to help with operational and growth issues. Win-Win has implemented quality standards and conducts ongoing training for member/participants and their employees. By providing this business infrastructure, Win-Win participants are free to focus on building core skills that will let them succeed. Viet-AID’s vision for Win-Win is to build a sustainable business that will help entrepreneurs succeed on a scale to maximize community empowerment through business ownership, job creation, and reinvestment. Our objectives are tied to this vision and include:

1) The launch of three or more new member businesses each year for five years; and

2) The creation of at least 45 new jobs in the same period.

The venture was organized as a corporation with equity investments from Viet-AID and the ICA Group. Equity capital provided in the first two years of operation will cover operational losses prior to breakeven in year five for Win-Win. Note that while Win-Win will take time to achieve profitability, each member business will be profitable within a few months of starting operations. Commercial cleaning consists of janitorial services provided to a variety of commercial property types. Low entry barriers and a highly fragmented marketplace mark the industry, with no large player or players dominating at the regional or national level. The sector is attractive for Win-Win’s member/participants because of the opportunity to earn a significant income for what is, essentially, a part-time job (15-20 hours a week). Members/participants can commence and sustain early operations with little capital investment (less that $2,000, some of which can be financed).

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Win-Win offers significant advantages to member/participants over existing franchise operations. Typical franchise operators and referral services demand up front fees (as high as $30,000 and up) and commissions exceeding 15-20% of contract revenues, without possibility of equity participation. Win-Win offers both a lower commission rate (initially set at 8%) and the opportunity to share in the success and growth of the cooperative through equity participation. Competitive Advantage Win-Win’s main competitive advantages are its novel approach to customer service and the commitment to quality of its members. The cooperative, with its central contact point for responsive, English-speaking customer service, is structured to address the most common customer frustration with commercial cleaning firms. Win-Win member/participants, as owner-operators, are more committed to delivering quality services than low-wage employees of a large cleaning firm. Another advantage for the venture is strong management. Win-Win’s manager is an experienced marketing executive with an MBA from Columbia University. This individual, who became president of the venture in May 2002, brings over 10 years of sales and marketing experience with firms of all sizes, as well as experience in consulting with entrepreneurs in start-up service businesses (Appendix D contains manager’s resume). Win-Win’s primary strategy for competing with large cleaning firms is to focus on providing high quality service and great customer service to small and mid-sized clients that are treated less well than the huge contracts that make up the majority of the large firms’ business. These smaller clients include professional service firms, such as law and accounting firms, as well as small retail establishments. As seen in Table 2 below, over 70,000 of these small businesses are in operation in Greater Boston. Industry Analysis Commercial cleaning consists of janitorial services provided to a variety of commercial property types: office, retail, industrial, medical facilities, and multi-family apartment common space, among others. Services are provided both on a regular, scheduled basis (“cleaning contracts,” with revenues cited as monthly or annual amounts). Common services offered include vacuuming, dusting, scrubbing and

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trash removal. Some cleaning contracts are on a one-time project basis (revenues cited per event). Common project contracts are for services like floor buffing, rug cleaning, and window washing. While some firms provide services to both the commercial and the residential market, most of the larger firms serve the commercial market exclusively. Commercial cleaning is typically performed in the evenings and early mornings while the employees of a commercial property are away from the site. The cleaning industry is a mature one. Despite its maturity, the industry has continued to grow as companies increasingly outsource cleaning functions and as new properties come onto the market. Although the industry is not recession-proof, it is somewhat resistant to cyclical movements in the economy due to the relatively inelastic demand for cleaning services. National Industry Trends The national market for janitorial/building maintenance services has expanded steadily over the past decade. Estimated industry revenues grew from around $17 billion in 1993 to just under $26.6 billion in 2000, a compound annual growth rate (CAGR) of 7.0%.1 It should be noted that the industry continued to grow right through the recession of the early 1990s (from $12B to $17B 1988-1992, data not shown in Figure 1) and is likely to resume a healthy growth pattern over the medium term.

Figure 1. Est. Maintenance/Janitorial Revenues, 1993-98 Total US & Suffolk Co. MA

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

1993 1994 1995 1996 1997 19980

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

Suffolk CoUS

Source: U.S. Bureau of the Census, County Business Patterns, ICA estimates.

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Total employment in janitorial services nationwide was estimated at 909,000 in 2000, up from 787,000 in 1993 (and 677,000 in 1988). Local Industry Trends The Massachusetts janitorial/building maintenance services market has grown at similar rates to the national market. From 1993 to 2000, total estimated revenues grew from $536 million to $929 million, a CAGR of 8.2% (years after 1998 estimated from growth trend; see Figure 1). At the local level, Suffolk County (Boston) janitorial revenues increased from $192 million in 1993 to $344 million in 2000, a CAGR of 8.7%. Suffolk County janitorial revenues represented about 37% of the Massachusetts total in 2000. The janitorial/building services industry has demonstrated more volatility at the local level than it has at the national level, although the local industry has grown more rapidly than the national average. Although the growth rate has certainly slowed over the past two years, the overall trend is likely to remain one of moderate growth. Demand Model Demand for janitorial services is linked to the health of the commercial real estate market, as well as trends in the outsourcing of non-core services. Growth in the commercial cleaning industry depends upon increased outsourcing, commercial vacancy rates, and the construction of new office and commercial space. By building a demand model based on projected new construction and occupancy rates, we can project the demand for new janitorial positions in the Boston market (increases in outsourced positions are an additional source of demand over and above the figures in this model). Our model focuses on the office market. Although retail and institutional customers also generate demand for janitorial services, the office sector is the largest component of the commercial cleaning market.2 The model projects modest growth for the office cleaning industry as the commercial real estate sector begins to recover from the downturn in 2001-2002. In future years, the vacancy rate falls and occupied

1 ICA estimates based on County Business Patterns data from the U.S. Bureau of the Census. 2 Based on data from the Building Owners and Managers Association and the Census Bureau, ICA estimates that the office sector represented 43% of the total janitorial services market in 1998. The remainder of the market was divided among retail, industrial, institutional, and other clients.

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office square footage rises. By holding the 2000 ratio of office cleaners to occupied space constant, we can project the number of janitorial workers who will be needed to meet the new office market demand for cleaning services. The model indicates that 214 new janitorial workers will be needed to meet new construction demand in 2003. The number of new office cleaners climbs an additional 191 in 2004 and 176 in 2005. In total, the model predicts new demand will exist for an additional 581 office cleaners. Existing firms will capture much of this increased demand. Nevertheless, these figures indicate that the office market alone can support a number of startup firms in the Boston market. Even assuming that new firms capture only five to ten percent of the increased capacity, the office market could support 10-15 new small-sized firms (30-60 employees) over the next three years. It should be noted again that adding in the demand from turnover, outsourcing, and other commercial cleaning sectors such as retail or industrial space would further increase these figures.

esearch into the makeup of the Greater Boston business marketplace

000

n 20

Table 1. Commercial Office Cleaning Demand Model

2000 2001 2002 2003 2004 2005Completed new office constr. (sq. ft.) 4,072,000 8,239,000 6,137,000 3,503,000 3,123,000 2,868,000

Total office inventory 109,171,000 117,410,000 123,547,000 127,050,000 130,173,000 133,041,000Vacancy % 2.9% 4.6% 6.4% 6.8% 7.2% 7.5%Vacant office space 3,143,000 5,444,000 7,886,000 8,677,000 9,384,000 10,021,000Occupied office space 106,028,000 111,966,000 115,661,000 118,373,000 120,789,000 123,020,000Occupied office space per janitor (sq. ft.) 12,677 12,677 12,677 12,677 12,677 12,677

New janitors needed to meet demand - 468 291 214 191 176

Proj. Employees - Janitorial Svcs 8,364 8,832 9,124 9,338 9,528 9,704

Sources: ICA estimates based on data from Reis, Inc. and County Business Patterns.

Roffers additional evidence on the potential of a strategy targeting small to medium size businesses. Data compiled by the Massachusetts Department of Employment and Training shows that of nearly 90,businesses operating in the area in 2000, 97% were classified as “small” to “medium” sized. 84% of these businesses had fewer thaemployees, just the type of small office or retail facility that is ideal for fledgling cleaning companies.3

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3 Data from US Small Business Administration (Boston MSA)

Table 2. Boston Businesses by Employee CountEmployment Size of Firm

Total < 20 < 500 500+1995 79,049 66,985 76,921 2,128 1998 83,233 70,320 80,888 2,345 1999 85,164 72,097 82,765 2,3992000 86,180 72,804 83,754 2,426

% of total (2000) 84% 97% 3%Source: US Small Business Administration, Boston MSA

10,66810,950

13%

10,5689,936

20-499

Market Analysis Boston-area customers would be willing to consider using a Viet-AID-sponsored cleaning company. In a market survey, 79% of companies and organizations surveyed indicated they would consider using Win-Win’s services. Neighborhood businesses are generally willing to help their peers in the interest of community development. Finally, federal, state and local government offices are also possible sources for business, due to various agencies and programs established to encourage small business growth. Market Survey In order to assess the level of demand for Win-Win’s services, Viet-AID interviewed 41 potential customers from the for- and non-profit sectors in addition to government agencies. The interviewees included

Figure 2. Percentage of Customers Willing to Consider Using A Socially Responsible Cleaning Company

Maybe4.9%

NA9.8%

No7.3%

Yes w/cond.19.5%

Yes58.5%

Source: Survey of potential customers, Nov. 2000-Jan. 2001 (N=41)

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banks, property managers, health care facilities, government agencies, and supermarkets, among other business types. Overall, the results indicate that opportunities exist in the market. Fifty-nine percent of survey respondents stated that they would consider using a Viet-AID-sponsored cleaning company; another 20%, for a total of nearly four out of five respondents, said they would use Viet-AID subject to certain conditions. These conditions include: ability to speak English, passage of criminal record background check, bonding and/or specific types of cleaning experience. Win-Win plans to focus first on those customers willing to try Win-Win “unconditionally,” and then to expand into specialized niches that carry additional requirements (healthcare, food service, bonded work). Win-Win’s English-speaking manager maintains frequent contact with all customers to assure that communications does not become an issue. The survey respondents had a median of 20,500 square feet to be cleaned, suggesting a median contract value of $25,000-35,000 per year. Cleaning firms cleaned the survey respondents’ spaces a median of five times per week. The cleaning service that nearly every interviewee contracted for was vacuuming/general office cleaning. Floor waxing/carpet cleaning was requested by nearly three quarters, while over half also contracted for window washing, indicating promising future sources for revenue. Slightly over one-third of the respondents paid their cleaning firms for snow removal. Cleaning customers were less likely to contract with commercial cleaning firms for related maintenance/handyman services such as landscaping and painting. The survey responses also contain data about the most important factors in selecting a cleaning firm. Potential customers generally ranked quality as the most important consideration in choosing a firm. Price was ranked second, followed by responsiveness and variety of services. These results indicate that Win-Win must provide work of the highest quality at a competitive price, and that timely customer service is very important. Although many potential customers said that they would consider using Win-Win, many of these businesses are satisfied with their current cleaning firm. Although this appears daunting, Win-Win’s experience to date shows that the market can be more accurately divided into three segments: 1) “actively” dissatisfied prospects, who are ready to make the switch immediately; 2) “actively” satisfied prospects, who have a strong relationship with their cleaning firm and

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will be difficult to switch; and 3) “passively” satisfied prospects, who have no particular reason to switch, but who may be open to social or other targeted marketing tactics. Even assuming that the number of very satisfied customers is several times that of those who are very dissatisfied, Win-Win can secure breakeven volume among the dissatisfied and passively satisfied customer (breakeven volume would require Win-Win to capture 0.2% of the Suffolk County market; see Market Capture section of this business plan). Marketing Focus - Neighborhood Penetration Given the competitive nature of the commercial cleaning industry, it will be important for a Viet-AID-sponsored enterprise to try to build a solid base of “friendly” customers, particularly among Dorchester-based institutions that are located near Viet-AID’s service area. The surveys of local customers conducted for this report turned up a number of promising leads. Some opportunities may exist with property management companies servicing these neighborhoods. Winn Management, the firm that handles Codman Square Neighborhood Development Corporation’s properties, stated that they were dissatisfied with some of their current cleaning contractors and that they would be willing to use Win-Win if Codman Square NDC recommended the company. Columbia Road properties, a small local property management company, stated that they accept bids on a monthly basis and that they would be willing to consider using a Viet-AID-sponsored enterprise. Peabody Properties, the management company that services the office building where Viet-AID had its offices until fall 2002, is currently evaluating Win-Win proposals for several of its properties (Apr 2003). The value of these contracts varies from a few thousand dollars (for one-time projects) to tens of thousands of dollars (for scheduled service), depending upon the nature of work and size of property involved. There are several other potential “friendly” or local Dorchester-area customers: JVS Skills Center, Massachusetts Cooperative Bank, Eastern Bank, and Capitol Food Company. The estimated size of these contracts ranges from $4,000 (bank branch) to $23,000 (supermarket). Eastern Bank stated that they were dissatisfied with their current contractor. These results indicate that a Viet-AID-sponsored enterprise might be able to secure an initial two to three Dorchester contracts worth a total of $20,000-$30,000. This amount would represent 14-21% of the projected year one sales volume. The opportunity to access some of

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the larger health center contracts would increase in later years. This local volume represents a base of business that Win-Win can use as a launching pad to penetrate the greater Boston market. Marketing Focus - Government Contracts Government contracts are another potential source of revenue for Win-Win. These contracts are attractive in that the volume can be large, although the bidding process and contract requirements can often be somewhat burdensome and drawn-out. Descriptions of the potential for each level of government are contained below. Federal Many federal agencies are required to use set-aside funds to contract with small businesses and firms employing disadvantaged populations (the Small Business Administration’s 8(a) BD program, for example). Win-Win is in the process of gaining vendor certification for these programs for itself and/or specific member/participant entities (Expected completion Summer 2003). There are 30 federal buildings within the Boston area, according to the General Services Administration. Another source of federal contracts is the U.S. Postal Service. There are 65 post offices inside Route 128, and the average size of a postal cleaning contract is about $8,300 per year. Most of these contracts are structured as two-year contracts with four two-year renewal options. Win-Win has initiated the process for vendor qualification on the Postal Service’s bid list. The USPS recently consolidated its services procurement offices to Missouri, increasing the difficulty of identifying possible opportunities. State To get jobs with state agencies it is necessary to bid on individual contracts. Fortunately, contracts are now posted on the state procurement web site. A search of the Comm-PASS site produced a total of 42 janitorial/cleaning contracts over a 5-year period for the entire state. A summary of some of those contracts is found in Appendix B. The contracts for which detailed information was provided (31 of the 42) totaled nearly $1 million on an annual basis, with an average contract size of $32,000 and a median of $13,000. Minority- and/or woman ownership is frequently among the criteria used to evaluate a bid for state government contracts. In the eight bids available through Comm-PASS for review, seven included State Office of Minority and Women Business Assistance (SOMWBA)

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certification as one of the selection criteria.4 The weighting of SOMWBA status ranged from 5% to 10% of the bid value. According to the SOWMBA database, there are 48 SOMWBA-certified commercial cleaning companies registered to do business in Massachusetts. Thirty-seven of these are located within Interstate 495, 24 are located inside Rte. 128, and 17 are located in Boston proper. Win-Win is in the process of securing SOMWBA certification for individual member/participants. City Each department contracts for janitorial services through its maintenance department. City bylaws require that these contracts have at least three bidders. In general, price is the most important criteria. Contracts commonly have one-to three-year terms. As with the state’s Comm-PASS web site, city bids are publicized on the city web site. Appendix B contains a list of a few sample city contracts. These contracts range from $23,000/year (Transportation Department) to $197,000/year (City Hall). Competition There are 885 commercial cleaning firms in the Boston Metropolitan Statistical Area (MSA - this geographic area covers most of Eastern Massachusetts and extends to New Hampshire). According to the Census Bureau, 148 of these janitorial service establishments were located in Suffolk County (Boston proper) in 2000.5 The average Suffolk establishment had 44 employees, $1.6 million in annual revenues, and $35,000 in billings per employee.6 Comparable national figures show that the average janitorial establishment nationally had only 17 employees, $489,000 in revenues, and $29,000 in billings per employee. Suffolk cleaning establishments thus appear to be significantly larger than the average national establishment. This discrepancy is likely due to higher commercial density in urban areas than in the country as a whole. In order to assess Win-Win’s competition, Viet-AID interviewed a sample of 49 commercial cleaning firms in the Boston area. (All competitor profiles can be found in Appendix C below). The firms interviewed broke down along some clear lines in terms of 1)

4 The State Office of Minority and Women Business Assistance (SOMWBA) is the Massachusetts state entity that certifies minority- and women-owned businesses. 5 MSA data is from Dun & Bradstreet; Suffolk data is from County Business Patterns. County business pattern data tracks establishments (physical locations) rather than firms. Although total establishments can vary greatly from total firms in some industries, the national ratio of establishments to firms in the janitorial service industry is 1.04. For the purpose of this report, establishments and firms can be treated as roughly equivalent. 6 U.S. Bureau of the Census, County Business Patterns (NAICS code #561720).

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size/number of employees; 2) local versus non-local ownership and 3) “mission:” that is, whether the entity was purely for-profit or was designed to further a socially-minded issue. The firms had been in business a median of 10 years, and had a median of 22 employees (average employment was 268 employees, reflecting the presence of a few very large companies). The companies ranged in size from one employee to 5,000 employees. Seventy-five percent of the commercial cleaning firms interviewed served only commercial customers. The remainder served both commercial and residential customers. Despite the fact that most of the commercial firms surveyed serve only the commercial market, the fact that a quarter of the respondents offer residential services indicates that it is possible to combine these service types. The wide range in company size and the weighting toward smaller entities was encouraging. Another encouraging sign was the number of smaller companies employing a social marketing strategy to get business. The success of these firms is a testimony to the existence of a target market that is capable of supporting several entities and is responsive to this type of marketing. Some of the socially minded, smaller firms include: Boston Rescue Mission ServiceMaster Boston Rescue Mission is a Christian, non-profit organization serving poor and homeless individuals in Boston. Their non-profit job creation branch, On the Job Inc., provides jobs and support services in their janitorial services franchise of ServiceMaster. Residents of transitional shelters in the Boston area are employed to clean offices, churches, and other facilities. Majestic Majestic is a four-year old company with five employees that started out doing mostly residential cleaning and is now branching out into commercial cleaning, serving Boston and the Metro west area. The company uses environmentally friendly cleaning products and assists low-income Spanish-speaking women transition into the workforce. Morabeza Morabeza is a women’s cooperative cleaning company started by the Boston-based Cooperative Economics for Women (CEW) and comprised of women from the local Haitian and Cape Verdean communities.

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In general, these existing social cleaning enterprises do not reduce Win-Win’s available market because their market share remains fairly low. If anything, the growth of additional socially oriented firms serves to raise customer awareness and increase receptivity to Win-Win’s marketing pitch. Win-Win’s true competition is conventional cleaning companies. Some of the larger examples of these companies are: Unicco Service Company Unicco provides commercial cleaning services nationwide and in Canada. The company was founded in 1949 and has $555 million in annual outsourcing revenues. In Massachusetts, the firm has approximately 330 customers in more than 6,000 buildings. Unicco has a total of 5,000 employees in Massachusetts. One Source One Source is a national commercial cleaning firm that has been in business in the Boston area for 30 years, serving Boston and its outlying suburbs. OneSource employs 3,000 unionized workers in the Boston division, of which 500-600 are full-time employees. Triangle Maintenance Triangle Maintenance is a private, family-owned national company based in New York with over 5,000 employees. The Boston-based branch only provides commercial cleaning to offices with a minimum of 10,000 square feet. As mentioned above, Win-Win’s primary strategy for competing with large cleaning firms is to focus on providing high quality service and great customer service to small and mid-sized clients that are treated less well than the huge contracts that make up the majority of the large firms’ business. These smaller clients include professional service firms, such as law and accounting firms, as well as small retail establishments. As seen in Table 2 above, over 70,000 of these small businesses are in operation in Greater Boston. Additional competitor information is contained in Appendix C. Competitive Assessment In order to assess market pricing and the competition, Viet-AID presented the 49 firms interviewed with the opportunity to bid on the cleaning contract for a 6,000 square foot space. The median bid was

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$730 per month for basic office cleaning services, including vacuuming, light trash removal, and cleaning of bathroom/kitchen surfaces. The $730 median is equivalent to an annual billing rate of $1.46 per square foot. This figure is consistent with industry benchmarks for small offices in the Boston-area. When interviewees were asked what the competitive advantages of their particular firms were, the most frequently mentioned attribute was experience. 46% of the firms that responded to this question chose experience as the factor that sets them apart from the competition. The second most frequently mentioned characteristic was quality of services (20%), followed by size of company (9.7% said large size was an advantage; 7.3% said small size was an advantage). Five percent of respondents mentioned minority- or woman-owned status as differentiating characteristics. Only two percent mentioned price or bonding as competitive advantages. These results indicate the importance of quickly creating a base of satisfied customers who can testify to a firm’s experience and quality of services in various marketing efforts. Win-Win will establish these key early customers by utilizing the contacts of Viet-AID and other non-profit/socially-minded organizations in addition to direct and telephone marketing to area businesses. Marketing Plan Based on the competitive analysis, some essential elements of the Win-Win marketing mix are clear. Win-Win’s service offerings must stress the highest quality. Pricing is also important, although there may be “wiggle room” with more socially conscious clients. The majority of sales growth in the industry (non-government) comes through referrals, so it is important to examine the usual promotional channels for cost effectiveness. In order to win contracts, Win-Win will:

• “Smile and dial:” Neighborhood-specific direct and telephone marketing to identify and develop prospective clients in Groups (1) and (3) above

• Differentiate its marketing message through emphasis on superior customer service, more equitable treatment of workers and possibly particular cleaning techniques (i.e., use of non-toxic chemicals)

• Continue efforts to secure business with nonprofits and Dorchester-area institutions by utilizing Viet-AID’s and other local contacts;

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• Leverage clients as they come online for contacts with other firms.

• Aggressively pursue new contracts coming on the market as a result of new construction

Marketing Strategies Comparing the competitive strengths cited above by prospective competitors with the desired attributes cited by prospective clients (Market Survey, p.2 above) reveals potential opportunities for Win-Win. Service quality was the most important factor customers mentioned in choosing a cleaning service. Experience is a reasonable measure of quality, so it is not surprising that a large number of companies lead with their experience. Comparatively few companies used price as a marketing tactic relative to the attribute’s ranking among prospective customers—in a low skill, labor-intensive field like cleaning, cutting prices can have a drastic effect on the bottom line. The third most important feature for a prospective client is responsiveness – if a problem arises, does the vendor act quickly to resolve it? None of the cleaning services in our test cited great customer service as a competitive advantage, revealing a great marketing opportunity for our service. Win-Win’s structure offers clients a convenient, English-speaking resource for questions and problems. “We offer superior customer service” is an important, differentiating claim that will drive Win-Win’s marketing efforts. Many prospective clients also mentioned the importance of “one stop shopping” for a variety of janitorial services beyond standard office cleaning. Win-Win has also established relationships with providers of specialized services (window-washing, etc.) to allow it to offer these services under its own name. Win-Win’s marketing strategy (for non-government contracts) grows out of the research conducted for this business plan as well as Win-Win’s experiences. Win-Win differentiates itself by offering top quality work AND superior responsiveness/customer service to its clients. Win-Win is able to price cleaning services on par with competitors (even though Win-Win cleaners earn considerably more). As appropriate, Win-Win has leveraged its social mission, that of providing more equitable pay for workers and developing the local economy, and Dorchester location as a competitive advantage with social-minded and/or local prospects. Win-Win is using this group to build experience

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and generate positive references to approach clients for whom the social marketing strategy is not as effective. Social marketing has limits: it cannot substitute for consistent performance and competitive pricing. However, it has proven to be an effective method of “getting in the door.” Win-Win will target the following groups to gain market penetration:

• Non-profit institutions. Boston is home to a number of non-

profit, community development corporations (CDC’s) - Viet-AID is one of these. Many CDC’s own or administer commercial and/or residential facilities. These properties are a natural fit for Win-Win’s services and mission. Local churches and health centers are also promising targets. These customers are more receptive to social marketing, and may prove easier to negotiate with in setting up the first few contracts.

• Community-conscious for-profit customers. The second

phase of marketing efforts will focus on identifying and securing contracts with “socially aware” for-profit entities. (Equal Exchange Coffee is a good example of a for-profit company in the Boston area that is “socially aware”) With these prospective clients, Win-Win will emphasize the fact that this franchise/coop provides low-income inner city residents with entrepreneurial opportunities. References from existing clients will also aid in gaining market share from this group of customers.

• Government contracts. In terms of government contracts, the

most promising opportunities appear to be state contracts with a SOMWBA (minority certification) weighting and possibly some city contracts. There may also be some opportunities with non-NISH federal office buildings. Many state and city departments REQUIRE that a percentage of contracts awarded go to minority/woman-owned firms. Therefore, Win-Win could win a small portion of a larger contract or subcontract for a larger firm, thus ensuring compliance with the regulations. As noted above, a key to securing government contracts is certification from the State Office of Minority and Women Business Assistance (SOMWBA). SOMWBA certification will also be beneficial in marketing to many private sector corporations.

• Socially conscious homeowners. In addition to the targets

described above, there may also be an opportunity for Win-Win’s members to secure contracts with socially conscious

18

homeowners. Such opportunities may arise in situations where Win-Win is providing services to a commercial client and an employee inquires about residential services.

Personal networking and direct mail are the most cost-efficient methods for reaching these groups. The manager has developed collateral materials for use in mailings. Follow-up is through telephone calls and email. Most cleaning services do not have a dedicated sales force, so this is another advantage Win-Win will have. Required Market Capture Win-Win will only have to capture a small fraction of the Boston area cleaning market in order to succeed. Given the assumptions contained in the Financial Plan section of this report, as well as the market size estimates listed above, breakeven revenue for each member/ participant with a couple of workers, and year one wages of $9.00/hour for member and employees, is in the $45,000-52,000 range. Depending on contract size, this equates to between two and five annual contracts per member, not counting the incremental revenues from “one-time” engagements. In year three, nine of these enterprises—the number contained in the year-three financial projections for the marketing coop—would have to collectively capture just 0.2% of the Suffolk market in order for all of them to achieve breakeven. Participant training, Spring 2002

19

Marketing & Business Milestones One measure of success for Win-Win is the number of member/ participants (and their family members, employees, etc.) who secure work through the cooperative. Another measure of success is contract revenues. Milestones will increase as Win-Win grows, with key objectives (number of participants, dollar volume, etc.) echoing those in the financial summary table on page 28. Below is a summary of the metrics Win-Win will track to measure progress against our objectives:

Table 3. Win-Win Cleaning, Inc. MilestonesOne Two Three Four Five

MarketingNumber of contacts (1) 100 150 250 500 750Referred Leads 25 75 150 150 150Proposals (2) 45 80 120 150 225Conversion 20% 25% 30% 30% 30%Addt’l Svcs Sold 10% 10% 20% 20% 25%

BusinessNumber of contracts 9 20 35 45Gross Dollar Revenues 157,000$ 357,506$ 562,669$ 773,143$ 1,094,087$ Retention rate 90% 90% 80% 80% 75%

OperationalCumulative # participants 3 6 9 12# Prospective Participants 15 10 15 20 25% of Gross Revenues to Win-Win 8% 8% 8% 8% 8%1 includes personal contacts as well as targeted direct mail, telemarketing, etc.

2 industry standard prep time for bids 0.5 - 1 hour

17

65

Management and Operations To fulfill its mission of creating improved economic returns for Win-Win participants and their employees, Viet-AID hired a manager for Win-Win with strong sales and customer service abilities to assure the success of the initiative. In addition, Viet-AID has worked hard to identify motivated entrepreneurs to start up the individually owned cleaning companies (and to become owners of the Win-Win cooperative). At this point, Win-Win has helped two entrepreneurs create businesses and is actively recruiting additional participants in the initiative. Organizational Structure The organizational structure for Win-Win is a hybrid model that allows individual ownership of enterprises while offering the advantages and efficiencies characteristic of larger companies. The opportunity to own one’s own business is important within the Vietnamese community,

20

with its traditions of self-determination. The model consists of individually owned small cleaning companies that are members of a central marketing cooperative/franchise. The member enterprises will support Win-Win through the payment of a small percentage of contract revenues. In exchange, Win-Win markets the cleaning services to customers and distributes the resulting contracts among the member enterprises. Win-Win also provides billing services, joint purchasing of some supplies and equipment, quality control, customer service/dispute resolution, and any other services that the cleaning companies and the general manager determine make economic or strategic sense. The advantage of this structure is that that Win-Win can provide access to customers and contracts that the individual entrepreneurs could not obtain on their own due to a lack of English language ability and marketing skills. In addition, by creating a single marketing identity and message, Win-Win can succeed in raising the market profile of these cleaning companies beyond that of a single small enterprise. Finally, the coop/franchise will be able to lower purchasing costs and provide other economies of scale normally available only to larger businesses. Viet-AID Commitment Aside from Viet-AID’s financial investment in Win-Win, Viet-AID also fills a central role in identifying and recruiting prospective member/participants for the venture. Prior to launch in 2002, Viet-AID conducted extensive outreach in the Vietnamese community in Dorchester. Viet-AID surveyed local residents, presented the opportunity at community meetings, conducted focus groups, and placed advertisements in local publications. Viet-AID successfully trained an initial class of 13 participants in cleaning skills and basic business skills (accounting, taxes, record-keeping, etc.). Viet-AID continues to receive strong support from community leaders for the Win-Win concept and inquiries from prospective participants. Viet-AID will conduct another training session for potential entrepreneurs in the summer/fall 2003. Thus far Win-Win has assisted two individuals in establishing small cleaning firms and has provided these individuals with cleaning contracts. Three additional entrepreneurs are moving closer to startup. For further details on how these individuals became Win-Win member/participants, see below.

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Operations Overview Below is a broad outline of Win-Win operations. To find more details on the relationship between Win-Win Cleaning and its member/ participants, please see attached Participant Agreement and Participant Policies documents. Member/participants, possibly in addition to family members and/or employees, are small cleaning companies operated as sole proprietorships or partnerships. These small companies perform a range of commercial cleaning services, primarily during evening hours for corporate customers, building managers, and other institutional clients. Some contract types—schools, multi-unit residential facilities, etc.—may also provide opportunities for limited daytime hours. Contracts are negotiated, signed and held by Win-Win Cleaning, with member/participants acting as independent contractors to perform the work. Member/participants are encouraged to seek contracts independently in addition to those provided through the cooperative. If a member/participant secures a contract without Win-Win’s involvement, he/she may ask Win-Win to administer the contract (at standard service fee level). Win-Win is not obligated to administer any independently negotiated contract, nor will it administer any contracts for which service fees are not paid. Training for each group of prospective member/participants takes place prior to the start of operations. Skills training is enhanced by the use of cleaning professionals who lead tutorials on various techniques. These core skill classes are supplemented by sessions dedicated to successful small business management. Topics like basic bookkeeping/ tax preparation and employee relations are covered with all prospective participants. Current member/participants will receive refresher courses and other training as part of group meetings held every month. Part of this training will be focused on preparing member/participants to assume operational control of the venture in as little as five years. After operations begin, there will be active sites where training of new employees and/or Win-Win participants can be staged. Viet-AID’s new home, a multi-use facility with office space, meeting rooms and childcare space, will provide a great venue to learn basic cleaning skills. Veteran participants and representatives from cleaning equipment and chemical suppliers will lead these classes, instructing

22

participants on improved methods or specialized cleaning tasks to broaden Win-Win’s service offerings. Another attractive feature of the Win-Win model for participants is group purchasing. At some point, it is expected that cleaning supplies and chemicals will be purchased in bulk by the cooperative, with savings passed on to member/participants. Equipment requiring significant capital outlay can be purchased by the cooperative, with costs shared on a pro rata basis by member/participants. Becoming a Win-Win Member/Participant Prospective members first complete training as described above. The structure of the venture is explained to them, with particular emphasis on the idea of equity participation (ownership) in the venture. Those who decide to become member/participants must first go to city hall to register as a business and get a certificate from the city. The next step is to buy basic equipment and supplies. Win-Win negotiated a discount for purchases through a local supplier, and to ensure consistent quality, Win-Win requires that supplies be purchased through this supplier. He/she must also purchase commercial liability insurance. Again, Win-Win negotiated a significant discount with a local agent, but member/participants are welcome to get a policy elsewhere as long as they meet minimum coverage levels. At such time that the member/participant hires an employee who is not an immediate family member, he/she is required by law to establish payroll withholding and provide workers compensation (W/C) insurance. Win-Win negotiated for discounted payroll services and a reduced premium on W/C insurance. Win-Win requires evidence from member/participants that payroll and W/C insurance have been secured before any additional contract payments are made. Further details are contained in the attached Participant Agreement and Participant Policy documents. Distribution of Contracts All contracts will be distributed by Win-Win to member/participants on a fair and equitable basis. The manager will take the following factors into consideration when distributing contracts:

1. Capacity to perform the job, including appropriate equipment, means of transportation, adequate labor, etc.;

2. Availability at the times required to perform the job; 3. Job-specific experience required by the client;

23

4. Quality of performance on past contracts; 5. Number of jobs that have been allocated to a particular coop

member relative to other members. Win-Win will make a concerted effort to spread jobs evenly among all member/participants. The manager makes the final decision about the allocation of contracts. The manager takes the above factors into account to the degree that the manager feels that such factors are critical to the successful performance of the job. If a member/participant fails to perform up to standards work that has been allocated to that member, Win-Win reserves the right to re-assign the work in question to another coop member. The manager will be responsible for determining whether a coop member has met the coop’s quality and performance standards. Quality Control Win-Win requires that all work performed by members be of the highest quality. The general manager will inspect the quality of work on a regular basis and will perform any other type of quality measurement or monitoring that the coop feels is necessary to maintain quality standards. The coop reserves the right to re-assign jobs on the basis of observed quality and/or customer satisfaction. All work performed by member/participants will meet or exceed the following standards:

• The coop member will perform all aspects of the work that are specified in the contract;

• The coop member will perform the job in accordance with any guidelines, policies, standards, or comments issued by the coop, including suggestions made by coop staff as the result of site visits or quality checks, or methods demonstrated in training sessions;

• The work site will be left in an extremely clean and tidy fashion; • No damage will be done to any of the client’s property or any of

the building fixtures or features; • The coop member will be very courteous and responsive to

customer requests, complaints, and other feedback; • The coop member will perform the work in the manner that is

least disruptive to the client; • The coop member will immediately let the coop manager know

about all customer requests, complaints, or other feedback.

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Billing & Payments Win-Win will handle all billing and receive payments for work performed on contracts that the cooperative has secured. Member/participants do not accept direct payment from customers. If a member/participant secures a contract without Win-Win’s involvement, he/she may ask Win-Win to administer the contract (at standard service fee level). Win-Win is not obligated to administer any independently negotiated contract, nor will it administer any contracts for which service fees are not paid. Win-Win will mail a check to members for work performed within five business days after the client’s payment for this work has cleared the coop’s bank account. The cooperative will not pay members for work performed prior to the clearing of a client’s check. The board of directors may authorize exceptions to this policy on a case-by-case basis. Manager’s Role The manager for the venture will need to juggle several roles, including that of trainer and business consultant, sales and marketing manager, quality assurance manager, customer service department, bookkeeper, and company advocate both internally and externally. As noted in other parts of this section, Win-Win’s manager is the final arbiter on many issues. He/she must earn the trust of the member/participants and clients alike. The manager works very closely with Viet-AID to overcome not only the challenges of starting a unique organization, but also those of guiding a growing number of entrepreneurs in the creation of their own businesses. Below is a brief summary of the manager’s responsibilities in various areas. The list is not all-inclusive; as with any new enterprise, the manager must have the flexibility to take on additional responsibilities as needed, in addition to a willingness to learn constantly to adapt and to the needs of the growing organization. Trainer/Business Consultant The manager conducts initial training for new member/participants with the assistance of Viet-AID staff and cleaning industry professionals, as described above in the operations overview. The manager is also responsible for organizing and leading ongoing training for member/participants and their employees. Sales and Marketing The manager has full responsibility for generating business for member/participants. This includes designing

25

and executing all marketing and business development programs, following up leads, and negotiating contract terms with clients. Win-Win Cleaning will hold all contracts, with member/participants acting as independent contractors to perform the work. This arrangement will ensure consistent quality standards and customer service for all clients. Quality Assurance The quality assurance function has two main layers. The member/participant is responsible for all work on “his/her” contracts, whether or not he/she personally performs that work. Accordingly, member/participants act as job supervisors on contracts for which they are responsible. The manager also makes spot checks at the job sites to make sure that work is being performed as it was taught in training. In addition, the manager contacts the client periodically to get feedback on performance and identify possible issues before they become a complaint. Customer Service The manager serves as the central contact point for ALL client questions and issues. The manager is also the contact for cleaners if there is an issue on one of the job sites. The manager has a mobile telephone through which he can be reached at all times. To date, this system has proven remarkably effective. Every client has welcomed an end to the frustrations they have experienced with previous services due to communications problems and a lack of responsiveness. Financial Manager The manager is responsible for all bookkeeping and financial reporting for Win-Win and is also available to assist member/participants with financial questions. The manager prepares monthly financial reports for the board of directors. The manager has engaged and works with a payroll service and accountant to prepare tax returns and other financial documents required by state and federal authorities. Advocate The manager is the primary spokesperson for Win-Win and is the public face of the company for active and prospective clients and member/participants, suppliers and the media. All these audiences deserve and receive respect and an enthusiastic, professional manner. For most member/participants, their new business is the first experience they have had with being their own boss, so a coaching persona is most effective. Filling all these roles is expected to be a fulltime job for the manager, with the bulk of day-to-day efforts occupied by sales, customer

26

service, and consulting with member/participants. Some of the tasks will fall outside standard business hours, and the manager, like that of every service business, will need to be available before 9:00 AM and after 6:00 PM to deal with emergencies. It is expected that the single manager will be able to handle these responsibilities for at least 15-20 member/participants, especially if the bulk of the contracts are for larger offices. In addition, an intern at Viet-AID is available to assist with member/participant relations, outreach/recruitment, and business development efforts. The manager who started with the venture in May 2002 brings an MBA from Columbia, over 10 years of sales and marketing experience with firms of all sizes, and experience in consulting with entrepreneurs in start-up service businesses. In addition, the manager has demonstrated a strong commitment to the social mission of the organization through several years of volunteer work for a number of non-profit groups. Appendix D contains the Win-Win manager’s resume. Financial Plan There are two sets of financial projections contained in this report. Appendix E contains integrated financial statements for a single enterprise. Appendix F contains integrated financial statements for the marketing coop/franchise. The two sets of financial projections strike a balance between what the market will absorb, what Viet-AID has the ability to deliver (in terms of numbers of entrepreneurs), and what the marketing coop/franchise needs to be financially viable. The two financial keys to this initiative are: 1) getting an adequate number of competent individual entrepreneurs to join Win-Win, and 2) hiring a manager with a strong sales ability. Based on experience with entrepreneurial initiatives, we have assumed that for the first four years this project will successfully help at least three entrepreneurs per year start companies that will survive. In year five this number increases to five companies. In order to assure success, Viet-AID will recruit considerably more entrepreneurs than the targeted number of successful enterprises. We have assumed a Win-Win member fee (the amount deducted from contract revenues to support cooperative operations) of 8%. Although some commercial franchises charge a fee of up to 15%, these are established entities that can deliver a book of business to franchisees on the first day of operations. A double-digit fee for a startup

27

coop/franchise would probably be a strong disincentive for potential entrepreneurs. Based on our expectations of financial performance and workforce availability, we believe that Win-Win will dip into equity capital for its first few years of existence. In addition to providing a portion of the equity for the venture, Viet-AID will also contribute non-cash support for items such as office space and legal assistance. By year five, Win-Win will be a fully self-sustaining social enterprise. Financial Summary The following two tables contain key financial data for a single

enterprise and for Win-Win as a whole.

tartup Capitalization

Table 4. Five Year Financial Summary--Single EnterpriseYear 1 Year 2 Year 3 Year 4 Year 5

0 52,0003.3

5 66,2230 10,720

15%23%

4,777 5,363

Number of Square Feet Cleaned 42,000 52,000 52,00FTE Workers on Assignment 2.6 3.3 3.3Sales (after member fee) 48,300 61,335 62,917Gross Margin 7,854 9,823 9,930Gross Margin % 15% 15% 15%Gross Margin % (pre-member fee) 23% 23% 23%Net Income 2,243 4,211 4,394

0 52,003.3

64,5410,24

15%23%

Table 5. Five Year Financial Summary - Win-Win Cleaning

Year 1 Year 2 Year 3 Year 4 Year 5Number of enterprises w/1 yr. of existence by year end 3 6 9 12 17

New enterprises prepared for operations in NEXT year 3 3 3 5 5

Total sales--all enterprises 157,500 357,506 562,669 773,143 1,094,087Member fee % 8% 8% 8% 8% 8%Win-Win revenues 12,600 28,601 45,014 61,851 87,527Win-Win net income (59,619) (45,757) (32,387) (18,360) 4,256Startup capital 80,000 100,000 0 0 0

S or the individual enterprises, the financial model assumes that the

invest $5,000 during the first year of Fentrepreneurs will eachoperations – the cost to start operations is under $2,000. The financprojections contain capital costs for the purchase of direct equ(vacuum cleaners, floor buffers, etc.), but they do not contain capital

28

ial ipment

7 It is useful to calculate this wage without travel time because this methodology simulates the effect of working on large contracts that eliminate the need for nightly travel between jobs.

costs for the purchase of computer hardware and software. These expenditures will be at the discretion of the member/participants. Notethat income for the enterprise is in addition to the salary earned byentrepreneur. Each company may also need a $10,000 loan (10%, 5 years). For the W

the

in-Win cooperative, the financial projections assume a total quity capitalization of $180,000. This investment will provide Win-Win

ple

ewith working capital and cover startup losses until breakeven. Viet-AIDand partner the ICA Group have already secured $80,000 of this startup capital and launched the business. A portion of Viet-AID’s equity is in the form of non-cash support for the venture, for examoffice space and telephone services. The additional infusion of $100,000 is scheduled for the beginning of year two of operations. Breakeven Analysis / Capital Requirements For an individual enterprise, given wages of $9.00/hour and a gross

ee), breakeven revenues ix

f gross sales and total expenses of about $80,000, the combined

y

margin of 17% (25% prior to the franchise fare in the $45,000-52,000 range. The integrated financials in AppendE project breakeven for the member enterprises starting in year one. For Win-Win as a whole to break even, given a franchise fee set at 8% osales of all of the member companies would need to total $950,000-1,000,000. At this point, we anticipate that Win-Win will experienceoperational losses for the first few years before the cooperative becomes completely self-supporting. These losses will be “covered” bthe initial equity investments before breakeven in year five. Capital Expenditures The following two tables contain capital expenditure schedules for a

for Win-Win. The schedule for individual s

ter

discretion of the individual entrepreneurs.

single enterprise and enterprises only contains expenditures for “direct” equipment; it doenot contain expenditures for indirect equipment such as compuhardware and software. These indirect expenditures will be at the

Table 6. Capital Expenditures--Single EnterpriseYear 1 Year 2 Year 3 Year 4 Year 5

Vacuum cleaners 600 400 0 1,000 0Floor buffers 700 700 0 1,000 0Carpet extractors 1,300 0 0 0 0Total 2,600 1,100 0 2,000 0

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Assumptions The financial projections for a single enterprise are based on the following assumptions:

• $9.00/hour year one wages • 3 x 1.33-hour jobs per night x 5 nights per week

• 2 trips of 20 minutes each per night (not including 1st and last

• 2.6 FTEs at 20 hours/week each in year 1 (2.8 in years 2-5)

Expense inflation: 3%

• ts receivable: 45 days

The financial projections for the marketing coop/franchise are based on the following assumptions:

$50,000 annual salary; health

• Accounts payable: 30 days

n in Viet-AID offices) • Pro bono legal assistance

op/franchise member companies based on the

trips)

• $1.25/square foot annual billing rate8 • 8% franchise fee • • Wage inflation: 3% • Billing rate inflation: 3% • $5,000 start-up costs paid by each entrepreneur in year one

Accoun• Accounts payable: 30 days • $10,000 loan at 10% with 5-year term

• 8% franchise fee • One staff member (manager)—

benefits • Accounts receivable: 45 days

• $180,000 in equity capitalization (in years 1 & 2) • No rent expenses (locatio

• Total number of cofollowing schedule:

Table 7. Capital Expenditures--Marketing Coop/FranchiseYear 1 Year 2 Year 3 Year 4 Year 5

Computer hardware 1,200 0 0 1,000 0Computer software 300 0 250 0 0Total 1,500 0 250 1,000 0

8 According to an interview with the Building Service Contractors Association International (BSCAI), the average commercial cleaning billing rate for Boston is $1.44/square foot on an annual basis. We have used $1.25/sq. ft. in our financial projections as a conservative reflection of the current economy. The BSCAI representative relied on data from the Building Owners and Managers Association (BOMA) to produce the Boston figure.

30

ool of prospective entrepreneurs and

Year 1: 3 Year 2: 6 Year 3: 9 Year 4: 12 Year 5: 17

Note: In order to attain these results, Viet-AID will start with a considerably larger pstartup companies.

Risk Assessment and Mitigation

ive like Win-Win all boil down to a variety of scenarios in which

olum -expec re itself (even beyond increased capital requirements). The section below escribes the most likely of these scenarios and mitigating factors in

o counteract them.

ith a projected ending cash balance of nearly $26,000. Note that the

Win-Win

contracts. The risks here are those common to any new venture, and

r 5

,087,527

6

(20,275) 1,701ending cash balance 26,191 80,568 46,119 25,843 27,545

The risks in establishing a cooperatone thing: sales volume. There arev e might be lower than planned (or in some, higher). Lower-than

ted sales might, in turn, have adverse effects on the ventu

dthe business plan that are intended t

Above is an expanded version of Win-Win expected results in the first five years of operations. The venture supports three new entrepreneurs in each of the first four years of operations, with five additional entrepreneurs anticipated in year five. The cash balance reflects planned equity infusions prior to years one and two totaling $180,000. The lowest capital point for the venture comes in year four,

Table 8. Five Year Financial Summary--Win Win Cleaning (base line)Year 1 Year 2 Year 3 Year 4 Yea

Number of enterprises w/1 yr. of existence by year end 3 6 9 12 17Total sales--all enterprises 157,500 357,506 562,669 773,143 1,094 Win-Win Revenues (8% of total sales) 12,600 28,601 45,014 61,851 87 (Win-Win Expenses) 72,778 75,323 78,030 80,567 83,522 Win-Win Net Income (59,619) (45,757) (32,387) (18,360) 4,25

increase (decrease) cash (51,633) 54,377 (34,450)

wanticipated net income/(loss) for Win-Win improves every year, with the venture breaking even during year five. (Note: even ifcontinues to add new participants at the rate of three per year, breakeven is delayed by only one year.) The financial projections in the business plan calls for member/ participants to produce over $150,000 (gross revenues) in their first year of operations. This will be difficult to achieve, given that not all participants will start on the first week with a full complement of

31

are exacerbated by compounding these elements across several enterprises in addition to the cooperative

small .

of

s

ese tasks in an organized shion. Most importantly, the low referral rate will be much less of a

The most important factor affecting sales growth is in the naturethis particular business. The majority of new accounts in the cleaning business come through referrals from current customers, implying a slowly accelerating sales curve. Win-Win is working to counter thitrend with a dedicated business development function to perform direct mail, telemarketing and (door-to-door) account prospecting. Most new firms cannot or do not perform thfafactor after the first one or two years, because by then we will have the track record to generate a healthy referral business. A slowdown in the commercial real estate sector could also affect sales. Whether through cutting the amount of new office space froconstruction or higher vacancy rates in existing

m buildings, this slowin

would result in lower demand for cleaning services and increased competition for remaining contracts. Win-Win’s response to this scenario is built into our marketing strategy of providing hi

g

ty firms)

sponsiveness. In a more competitive market, this distinguishing

me tasks,

lt will

ollars in a given ear will increase. As with the referral scenario, this issue would tend

king

f its

cleaning dustry could quickly get up to speed.

gher qualiservice and unmatched (among small to midsize cleaningrefeature will help us compete for the smaller “pie.” What if the promised quality is not delivered? Most of Win-Win’s participants are new to the cleaning business. Even if they have soexperience in cleaning, it is related to a small number of specific rather than the management of all tasks in a facility. There is the possibility that some customers will stop using Win-Win. The resube similar to that in the scenarios above (low sales growth), exceptthat the number of participants servicing the total dyto diminish after the first year, with experienced participants worclosely with new members to “show them the ropes.” Win-Win also needs to consider the sudden loss or incapacitation ogeneral manager. This loss would obviously have an effect on sales in the short term. However, the general manager has been careful to make the bookkeeping and business development functions “transparent,” with weekly funnel reports and a constantly updated database of contact data for any new leads that come in. A replacement from Viet-AID’s staff or recruited from thein

32

In the low sales version, the lower cash position at the end of year four may require additional bridge financing. However, Win-Win should still break even in year five. Finally, we must consider the prospect of the Win-Win concept catching on and succeeding far beyond our expectations. In this scenario, workload might exceed the capacity of the Win-Win manager. In the table below, we examine the effects of stronger-than-expected sales and the addition of an assistant after year 3. We

will

of $18,000, however, cooperative results re still solid with breakeven early in year five.

anticipate that this person will be a member of Viet-AID’s staff who devote some percentage of their time to working on Win-Win. Even with a “full-time” salary level a

Conclusion Viet-AID’s market research, survey data, and focus group results indicate that Win-Win has strong potential to be a successful enterprise. Nearly 80% of the potential customers surveyed for this report stated that they would be willing to consider using a Viet-AID-sponsored enterprise for their commercial cleaning needs. The coop/franchise needs to secure only two to five contracts per participating entrepreneur for the small enterprises to break even, and the cooperative itself will be profitable in less than five years. The market for commercial cleaning services in Boston is projected to grow modestly over the next few years and will be able to support a

,1168 85,6890 83,485

37

,825) 1,2411,704

Table 9. Five Year Financial Summary (slow sales pick up/early client disatisfaction)Year 1 Year 2 Year 3 Year 4 Year 5

Number of enterprises w/1 yr. of existence by year end 2 4 7 11 17Total sales--all enterprises 105,000 238,338 427,613 687,097 1,071 Win-Win Revenues (8% of total sales) 8,400 19,067 34,209 54,96 (Win-Win Expenses) 72,694 75,132 77,814 80,43 Win-Win Net Income (63,743) (55,173) (43,145) (25,446) 1,5

increase (decrease) cash (54,762) 45,143 (44,917) (22ending cash balance 23,062 68,205 23,288 463

Table 10. Five Year Financial Summary (fast growth with new employee @18k in years 4 and 5)Year 1 Year 2 Year 3 Year 4

Number of enterprises w/1 yr. of existence by year end 3 7 11 16Number of new enterprises during year 4 4 5Total sales--all enterprises 157,500 410,006 681,838 1,013,199 1,418,470Franchise fee % 8% 8% 8% 8% 8% Win-Win Revenues (8% of total sales) 12,600 32,801 54,547 81,056 (Win-Win Expenses) 72,778 75,407 78,221 104,118 107,896 Win-Win Net Income (59,619) (41,627) (22,973) (22,596) 5,9

increase (decrease) cash (51,633) 57,990 (25,811) (23,656) 2,593ending cash balance 26,191 84,181

Year 522

6 6

113,478

22

58,370 34,714 37,306

33

number of small startup firms. The main challenges for small firms are

with

order to assure success, Viet-AID has aggressively recruited

among

control of s

anagement have created an entrepreneur council as a vehicle to

. The e

a model

and in other cities. The Win-Win oncept should not be confined to the Vietnamese community – the

limited marketing budgets, lack of access to large contracts, and ageneral lack of economies of scale. The proposed marketing cooperative/franchise will address these issues by performing centralized marketing and billing functions for a network of small, independently owned commercial cleaning enterprises. This organizational structure will also allow Vietnamese immigrantslimited English skills to access otherwise unavailable customers. Intalented community-based entrepreneurs and hired a coop/franchise manager with strong sales skills. Win-Win will continue to focus on securing initial cleaning contracts in the Dorchester area, and pursuing a differentiated market niche focusing on socially responsible customers, nonprofit institutions, and government contracts, other potential sources of business. Ultimately, after certain business milestones have been met,the Win-Win cooperative will transition from Viet-AID and its partnerto the cooperative members. In the meantime, Viet-AID and Win-Winmseek input from the entrepreneurs in the governance of Win-Wincouncil is also serving as a first step toward a greater membership rolin the governance of Win-Win. Viet-AID’s long-term vision for Win-Win is that it will serve as for similar ventures in other business sectors (for example, security services, landscaping, etc.) in Boston cmodel could also benefit other immigrant and/or low income communities where entrepreneurial drive is thwarted by a lack of English language or core business skills.

34